Digital consumer protection in action – HCA launches market study into digital comparison tools

On 27 March 2019 the Hungarian Competition Authority (HCA) launched a market study to explore the specific market developments relating to the application of digital comparison tools (DCTs) and their effects on consumers' decision making. The market study puts the HCA's mid-term digital consumer protection strategy paper into action (for further details please see "HCA publishes digital consumer protection strategy").

Why is the HCA concerned about DCTs?

DCTs aim to help consumers by bringing together several products or services and offering a variety of ways to help them to choose between options, make purchases or change providers. Thus, DCTs play a significant role in consumer decision making. Consequently, they may also pose certain concerns in terms of consumer protection if they omit important information, including:

the real features of the compared products;
the aspects on the basis of which comparisons and rankings are made;
the ways consumer data will be used as part of the business model; and
the operators of the respective DCTs.

As foreseen in its consumer protection strategy paper, the HCA aims to protect vulnerable consumers in the changing winds of digitalisation. The HCA intends to ensure that – even if they lack digital knowledge – consumers will not suffer disadvantages as a result of the existence of informational differences. A market study is a great tool for the HCA to shape the direction and nature of later interventions (if required) in the most appropriate manner.

What can concerned market players expect as a next step?

As confirmed in its press release,(1) in addition to assessing consumer expectations, habits and experiences relating to the use of DCTs (eg, websites and mobile applications), the HCA will focus on:

the extent to which DCT operators are aware of the legal requirements concerning fair commercial practices towards consumers and the degree of compliance with these requirements;
how and why these tools have changed in both their content and appearance;
the underlying business models; and
the types of communication and advertising activities carried out by the operators.

To gather the necessary information, the HCA will conduct a market sweep. Such sweep consists of information requests targeting major DCT operators, their professional interest organisations and the companies appearing with their goods and services on DCTs, as well as consumer protection non-governmental organisations and authorities. If further clarification is required, the HCA might organise workshops or invite the concerned parties to face-to-face discussions where they can explain their positions on the raised questions.

As a result of the market study, the HCA will produce a report presenting:

the investigated issues;
the facts and findings of the market study;
suggested further measures; and
the methodology applied.

The report will be published on the HCA's website.

What if a requested company is not keen to participate?

Participation in the market study is voluntary; the Competition Act does not allow the HCA to apply any procedural penalties or other coercive measures against those who refuse to contribute. Yet, the requested parties are encouraged to contribute. If the answers are compiled carefully, they might redress the concerns which led the HCA to initiate the market study in the first place.

Potential consequences

If the HCA reveals a market disruption, or that consumer rights are infringed by the identified practices, the following might happen:

the HCA could initiate a 'competition supervision proceeding', which could potentially result in substantial fines (up to 10% of the company's annual worldwide group turnover); or
if the HCA concludes that the market disturbance cannot be remedied by a competition supervision proceeding (eg, the conduct is not yet punishable by the applicable laws), the HCA may:

inform the competent committee of Parliament, the competent minister or authority of this fact;
publish non-binding recommendations towards the market players; and
initiate the enactment or amendment of legislation to regulate the examined conduct.

Comment

The market study fits in with the HCA's recent focus on consumer protection and efforts to serve as a lighthouse in the digital age.

DCTs are not essentially harmful inventions. In fact, benefits from increased supplier competition are most likely to be passed on to consumers in the form of more choice, lower prices and better value. However, DCTs must operate transparently, remain understandable to consumers and refrain from misleading consumers. Further, DCTs which omit or hide important information, or provide it in an unclear, unintelligible, ambiguous or untimely manner, may breach the law. Based on prior experience (for further details please see "Digital consumer protection – Black Friday success turns sour for major online marketplace"), in such cases the HCA – as the watchdog of digital consumer protection – will not hesitate to bite.

Endnotes

(1) Hungarian Competition Authority press release available here.

This article first appeared on International Law Office.

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